Atanu Dey On India's Development

Favorite bits from the archive: Types of Government

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India is very widely celebrated as having a democratic government. India’s government can also be accurately described another way. A kakistocracy is defined as government by the most corrupt and the least principled. As India’s case clearly demonstrates, the two are not mutually incompatible.

Here’a bit from “Of Kakistrocracies, Principals and Agents” (Feb 2008):

Benevolent and Predatory Governments

One can assume that the government is comprised of enlightened politicians whose altruistic objective is to maximize social welfare. In other words, the government is benevolent. Or one can take the more realistic albeit extreme position that governments are run by self-interested people whose venality compels them to maximize their private gains at the cost of social welfare. In short, the government is predatory. Still, depending on how long the time horizon of their predation is, predatory governments can be classified into “roving bandits” or “stationary bandits.” The former have a short-term outlook and do not “cultivate” the private economy to maximize their loot. Part of that strategy would be to steal the resources that would have provided public goods. In contrast, the stationary bandit would attempt to maximize the total output of the economy all the better to extract the most over a longer time horizon by providing public goods that complement private goods and private effort.

One can reasonably conclude that in India’s colonial British government was mostly predatory with a short planning horizon and was not benevolent. The interesting question is whether the governments after political independence were roving bandits or stationary bandits. Because India is a democracy of sorts where governments get voted out of office, it imposes a severe endogenously determined short planning horizon and therefore the governments are forced to play the roving bandit role. This could partly explain the lack of adequate amounts of public goods. Any government could reason that there is no point in spending money on public goods instead of just stealing the resources if the rewards of using public resources to provide public goods end up enriching some successor bandit government. This is the classic tragedy of the commons scenario.

Go read it all.